Form-8K

The Form-8K is a SEC-mandated report filed by public companies to report unexpected events or transactions that are material in nature, and thus have an impact on the share prices of the company.

In accordance with the Securities Exchange Act (1934), specifically defined events must be reported within 4 business days. The main purposes of the Form 8-K are to:

  • Satisfy regulatory requirements
  • To provide investors and shareholders with up-to-date company information
  • Update previously released reports such as the 10-Q (quarterly report) and the 10-K (annual report) with important developments.

The criteria for reporting such material events or transactions are defined within 9 major sections or categories. These events (or transactions) are deemed to be significant for investors and shareholders towards their investment-decision making.

 

Why are Form 8-K reports important?

To make sound investing decisions, investors need information that is timely, reliable, and accurate. Material information concerning the activities, operations, and business of a corporation can have a significant impact on important aspects such as

  • Future revenues, earnings, cash flows, and other financial items
  • Strategic direction
  • Competitive positioning in the market
  • The industry it operates in

Such factors inevitably will impact its share price in the market. Therefore, it is important that investors have access to important information that is crucial in making investment decisions.

Annual reports (10-K) and quarterly reports (10-Q) contain valuable information. However, there is a time lag between the issuance dates of such reports. The Form 8-K is therefore used as a vehicle to report material events not captured by the 10-Q or 10-K.

 

What are material events?

The actual Form 8-K is available for download on the SEC’s website at:

https://content.personalfinancelab.com/wp-content/uploads/2013/10/form8-k.pdf

Material events fall under one of 9 main sections.

Section 1- Registrant’s Business and Operations

MATERIAL EVENTS:

  • Entry into a material definitive agreement
  • Termination of a material definitive agreement
  • Bankruptcy or receivership

Section 2- Financial Information

MATERIAL EVENTS:

  • Completion of acquisition or disposition of assets
  • Results of operations and financial condition
  • Creation of a direct financial obligation or an obligation under an off-balance sheet arrangement of a registrant
  • Triggering events that accelerate or increase a direct financial obligation or an obligation under an off-balance sheet arrangement
  • Costs associated with exit or disposal activities
  • Material impairments

Section 3- Securities and Trading Markets

MATERIAL EVENTS:

  • Notice of delisting or failure to satisfy a continued listing rule or standard; Transfer of listing
  • Unregistered sales of equity securities
  • Material modification to rights of security holders

Section 4- Matters Related to Accountants and Financial Statements

MATERIAL EVENTS:

  • Changes in registrant’s Certifying Accountant
  • Non-reliance on previously issued financial statements or a related audit report or completed interim review

Section 5- Corporate Governance and Management

MATERIAL EVENTS:

  • Changes in control of registrant
  • Departure of directors or certain officers; Election of directors; Compensatory arrangements of certain officers
  • Amendments to articles of incorporation or bylaws;
  • Change in fiscal year
  • Temporary suspension of trading under registrant’s Employee Benefit Plans
  • Amendments to the registrant’s code of ethics, or waiver of a provision of the code of ethics
  • Changes in shell company status
  • Submission of matters to a vote of security holders

Section 6- Asset-Backed Securities

MATERIAL EVENTS:

  • Change of servicer or trustee
  • Change in credit enhancement or other external support
  • Failure to make a required distribution
  • Securities act updating disclosure

Section 7- Regulation FD

MATERIAL EVENTS:

  • Regulation-required disclosures

Section 8- Other events

MATERIAL EVENTS:

  • other events deemed material or having important informational value

Section 9- Financial Statements and Exhibits

MATERIAL EVENTS:

  • financial statements of businesses acquired
  • pro-forma financial information
  • shell company transactions

Conclusion

The Form-8K report is crucial for investors and shareholders in remaining current on major or material events and transactions performed by a company.

Such events typically have the ability to affect the firm’s stock price. Therefore, investors use such information to update their investment decisions such as buying, selling, or holding the stock.

The Form 8-K report is mandated by the SEC, with the purpose of providing timely and relevant information not included in annual or quarterly reports.